Ascendas Hospitality Trust should do well.

A reader saw my blog on Ascendas H-Trust earlier this year and, after doing some research, decided to invest in the Trust for income. He shared the following with me:

1. 52% of net property income is derived from Australia and this proportion could rise because of the boom in tourism. Number of international flight routes have increased with more Chinese tourist arrivals.

2. 25% of net property income is derived from Japan and tourism has been on the rise in Japan as well. The Japanese government's drive to almost double the number of visitors to 40 million by 2020 is going to give a continued boost to the hospitality sector.




3. The Trust has a gearing level of 33%. Backed by a strong sponsor and having natural forex hedge with its debt largely denominated in local currencies are positives.

4. Through Park Hotel, the Trust derives only 15% of its net property income from Singapore. So, the slowdown in the Singapore hospitality sector is less of a concern for the Trust compared to CDL H-Trust and FEHT which have much larger exposure to the market here. The fact that Park Hotel is master leased provides greater income visibility too.

5. Assets owned by the Trust are mostly freehold and do not suffer from lease decay which is another plus when compared to CDL H-Trust and FEHT.





Good stuff.

I will end this blog by saying that I got into the Trust at lower prices and I am investing for income. Not too concerned with the fluctuation in unit price.

As long as the trust continues to do well enough to pay me an income that makes sense, I am happy.

Related post:
More income from Ascendas H-Trust.
See my Japan travel photos: HERE.

Planning a $1.4m legacy but be aware of this.

Reader:

I have an idea to bounce off you. 

Just chit chat. 

I know you don't give advice.

I am 54 and just became a father. 

I married rather late in life.





As a father, I am thinking about my child's future. I am well aware that by the time he is 21, I would be 75 if I am still alive by then.

Next year, I will be able to withdraw more than $100K from my CPF account as I have already met the minimum sum for my age. 

I am thinking of putting the money into my child's CPF SA instead of leaving it in my OA.





I could top it up to $166K and do a one time top up to his CPF SA and, compounding at 4% a year, he will have a retirement nest egg of more than $1.4 million when he turns 55. 

I won't be here for most of his life and this is something I can do for him.







AK:

You have to remember that your CPF money is meant to help fund your retirement. 

If you have other ways to fund your retirement adequately, then, OK.

Yes, your child won't be able to touch the money until he turns 55. 

If your plan is to help your child be financially secure in his old age, I would say that this is a very generous and thoughtful thing you are doing for him. 





However, remember, the CPF SA interest rate could change over the very long term and 55 years qualifies as very long term. 

After all, the plan is to peg it to long term government bond coupons eventually, if I remember correctly.





When would this happen? 

I have an inkling that this might happen when the 10 year SGS bond rises to a level that is at 4% or a bit higher. 

We will have to accept higher or lower returns on our CPF savings in future from then on.





So, we won't be wrong to expect CPF SA interest rate to fluctuate over the very long term. 

So, don't think of 4% as something that is sacrosanct.

Even so, at 3.5% per annum, $166K will become $1.1 million in 55 years. 




At 3% per annum, it will be about $844K in 55 years. 

That is still quite a bit of money.

Your child won't have to worry as much about retirement funding and can be quite comfortable as a working adult, I imagine. Lucky kid.

A father's love. :)





Related post:
Make CPF part of child's savings.